Prosecutors scored another win in the U.S. crackdown on market “spoofing” when two former traders at Bank of America Corp.’s Merrill Lynch unit were convicted on fraud charges for manipulating precious-metals futures.
Edward Bases and John Pacilio were found guilty by a federal jury in Chicago on Wednesday for illegally flooding the market with buy and sell orders they quickly canceled to move gold, silver or platinum prices in the direction they wanted from 2008 to 2014. While there’s nothing inherently wrong with canceling orders, both men were accused of intentionally defrauding other traders.
“They did it to make more money on their trades, to rip off other traders,” prosecutor Scott Armstrong told jurors earlier. “They did it over and over and over again. They took pride in their skill to manipulate prices. They took pride in ripping off other traders. They bragged about it. They taught younger traders the ropes.”
The two-week trial was the latest U.S. prosecution of a “spoofing” case in recent years. In June, former Deutsche Bank AG precious-metals traders James Vorley and Cedric Chanu were sentenced to a year in prison after they were convicted in Chicago last year.
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The government has extracted more than $1 billion in fines from companies including JPMorgan Chase & Co., Bank of America Corp. and Deutsche Bank AGto resolve liability for market manipulation tied to spoofing. Merrill Lynch paid a $36.5 million fine in 2019 to resolve government investigations into precious metals spoofing.
While a handful of traders have pleaded guilty since 2015, prosecutors have had mixed results for cases that went to trial.
In 2018, former UBS Group AG trader Andre Flotron was acquitted by a jury in Connecticut. The following year, in the middle of a trial in Chicago, prosecutors dropped charges against a computer programmer who developed the spoofing tool used by Navinder Singh Sarao, a key figure in the 2010 stock market Flash Crash that briefly wiped almost $1 trillion from the value of U.S. equities.
Bases and Pacilio were indicted on 20 charges, including wire fraud affecting a financial institution and commodities fraud.
The case is U.S. v. Bases et al, 18-cr-00048, U.S. District Court, Northern District of Illinois (Chicago).
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